There are a number of things to consider when beginning your financial settlement on divorce; one main issue will be to understand whether a clean break settlement is appropriate or whether spousal maintenance is required.
Ideally, you and your former partner should attempt to come to an agreement in respect of the finances. If you can't agree, you will need to ask the family court to make a financial order on your behalf. If you seek a court order you will be required to undertake a Mediation Information and Assessment Meeting (MIAM) to see whether mediation could help you reach an agreement.
If you and your partner are not married, the rules about financial settlements are different. If you agree on how your family finances will be divided, you can draft a separation agreement, then this can be made binding by asking the court to turn it into a consent order. If you wish to seek a consent order or if you can't agree, you should seek legal advice from a family lawyer.
The court's view on financial settlements
Sadly, there is no magic formula for dividing marital finances, and all cases will be decided based upon the individual circumstances of each spouse and any children of the marriage.
The court's primary focus when hearing a divorce financial settlement case will be on achieving fairness; this may mean a 50/50 split, but not always.
When children are involved, whether you are married to the other parent or not, you will need to agree on child maintenance. If you can't agree, you can ask the court to decide for you. The court may require an assessment to be made through the Child Maintenance Service.
What is a clean break financial settlement?
A clean break means that all financial obligations are ended between the two former spouses. All marital property is divided, including pensions, jointly owned homes, savings, and investments. This may mean that property will need to be liquidated (sold) or put into trust to be liquidated at a specific time in the future, for example when children of the marriage turn 18.
Whenever possible, the court will aim to achieve a clean break settlement between divorcing spouses, so that financial ties are severed and no variation of the settlement is possible. However, clean break settlements may not always be feasible for a number of reasons and spousal maintenance may be needed.
What is spousal maintenance and when is it appropriate?
Spousal maintenance is a sum of money paid by one spouse (usually the higher earner) to the other spouse following divorce. It's usually paid monthly and is typically only relevant following longer marriages.
Spousal maintenance may be appropriate when one spouse is unable to support themselves financially, or their ability to earn a living is curtailed. For instance, if one spouse is unable to earn a living following divorce because they are caring for children then the primary earner may be required to pay an amount of spousal maintenance to help them cover living expenses.
The court may stipulate that spousal maintenance is paid only for a certain amount of time, perhaps for a specific number of years or ending when the children reach school age. The court may also stipulate that spousal maintenance payments will end if the recipient lives with a new partner or remarries.
If spousal maintenance is agreed as part of the financial settlement on divorce, both parties should be aware that, unless a "bar" has been put on the spousal maintenance, if their circumstances change the other party can return to the court to seek a variation order.
A clean break with spousal maintenance
Sometimes, a clean break financial settlement can be achieved with a clause for spousal maintenance included.
A deferred clean break can occur when one spouse pays maintenance for a set period, perhaps a few years, and once this period is up, all financial ties between the parties will end. This allows the less well-off spouse time to seek an income that will cover their living expenses so that they can support themselves. This also means that there is an assurance for the other spouse that at the end of the specified time, there will be no further claim for payments.
A further option for spouses who want a clean break but where one spouse is financially disadvantaged is to agree a lump sum in respect of spousal maintenance. This is only likely to be an option when there is a significant sum in the marital pot, but it can be an ideal way to acknowledge the need for spousal maintenance while ending financial ties as quickly as possible.
If this route is chosen, it will mean further financial claims will not be possible and this can be attractive for the paying spouse, especially if their income is likely to increase in the future.
How are financial settlements calculated?
Any financial arrangement between divorcing spouses should be fair and see both parties able to maintain a similar standard of living after the divorce to that which they experienced during the marriage.
Fair financial settlements can only be achieved if there is full financial disclosure and it is important that both parties receive independent legal advice from experienced divorce solicitors, whether they are attempting to negotiate an agreement or are seeking a financial order through the courts.
